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respondent’s determination as to the section 72(t) additional
tax.
C. Accuracy-Related Penalty
Pursuant to section 6662(a), respondent determined an
accuracy-related penalty of 20 percent of the amount of the
underpayment attributable to a substantial understatement of tax.
In the alternative, respondent imposed the accuracy-related
penalty on the amount of the underpayment due to negligence or
disregard of the rules and regulations. Respondent’s
determinations are presumed to be correct, and petitioner bears
the burden of proving that the accuracy-related penalty does not
apply. See Rule 142(a).
A substantial understatement of tax is defined as an
understatement of tax that exceeds the greater of 10 percent of
the tax required to be shown on the return or $5,000. See sec.
6662(d)(1)(A). The understatement is reduced to the extent the
taxpayer has (1) adequately disclosed his or her position and has
a reasonable basis for the tax treatment of the item, or (2) has
substantial authority for the tax treatment of the item. See
sec. 6662(d)(2)(B). Section 6662(c) defines “negligence” as any
failure to make a reasonable attempt to comply with the
provisions of the Internal Revenue Code, and “disregard” as any
careless, reckless, or intentional disregard.
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Last modified: May 25, 2011